Age DOES count!

On Monday this week, several countries around the world marked the world’s population at 7 billion, proclaiming their new-born infants had earned the milestone. The fact is however, that the world’s fertility rates have actually declined, representing significant population growth decline in the last few decades.

So how does this affect business?

Well, in the 1970’s the average family in the world had four or five children. Now, the number is 2.45 worldwide; and for many countries this is below replacement levels. This is, of course, having a massive influence on demographic change. It is the shifting balance of age groups within a population that is interesting to consider: your labour force, your clients, your pipeline of clients, your succession plans….are all influenced by demographics.

“A fall in fertility sends a sort of generational bulge surging through a society. The generation in question is the one before the fertility fall really begins to bite, which in Europe and America was the baby boom generation that is just retiring (or are they?), and in China and East Asia the generation now reaching adulthood. To begin with, the favoured generation is in its childhood; counties have lots of children and fewer surviving grandparents (who were born at a time when life expectancy was lower). That was the situation in Europe in the 1950’s and in East Asia in the 1970’s.

But as the select generation enters the labour force, a country starts to benefit from a so-called ‘demographic dividend’. This happens when there are relatively few children (because of the fall of fertility), relatively few older people (because of high morality previously); and lots of economically active adults, including, often, many women, who are entering the labour force in large numbers for the first time. It is a period of smaller families, rising income, rising life expectancy and big social change, including divorce, postponed marriage and single-person households. This was the situation in Europe between 1945 and 1975 and in much of East Asia in 1980 – 2010.

A demographic dividend tends to boost economic growth because of a large number of working-age adults increases the labour force, keeps wages relatively low, boosts savings and increases demands for goods and services. Part of China’s phenomenal growth has come from its unprecedentedly low dependency ratio – just 38 (this is the number of dependents, children and people over 65, per 100 working adults, and it implies that the working-age group is almost twice as large as the rest of the population group put together).

A demographic dividend does not automatically generate growth. It depends on whether the country can put its growing labour force to productive use.”

[Source: THE ECONOMIST October 22, 2011]

Have you considered how your business is affected by the demographics of your stakeholders?